Download economic think tank: themes

ECONOMIC THINK TANK: 18-21 November 2002, Cape
Town: Key Themes for Discussion
Andrew Boraine, Chairperson, SA Cities Network and Advisor to
Minister Mufamadi
Location of production in space

Distorted spatial economy within South Africa. Overall, only 20% of places
(towns and cities) produce 82% of South Africa’s GDP. There is a
concentration of more than 80% of the economy’s manufacturing in six
metropolitan regions.
CITY
Populatio
n 2001
%
Contributio
n to SA GDP
in 2000
%Contributio
n to SA GDP in
1996
%
Contributio
n to SA in
1990
Coastal
City
with
Port
Average
Annual
Population
growth
Rate, 19962001
Johannesburg
2962759
14.98%
14.16%
14.22%
No
1.02%
Cape Town
2858743
14.01%
12.82%
11.90%
Yes
1.01%
Durban
2981237
7.77%
8.06%
8.18%
Yes
0.96%
Pretoria
1454290
8.55%
7.88%
9.06%
No
1.03%
East Rand
2054133
7.78%
8.00%
8.67%
No
1.01%
Port Elizabeth
1015334
2.46%
2.31%
2.58%
Yes
1.02%
Total %
13326496
55.6%
53.2%
54.5%
1.5%
(in Willem Naude and Waldo Krugell (2002): `An Inquiry into Cities and their role in subnational economic
growth in South Africa’, Potchefstroom University, unpublished paper; Source of data: STATSSA, 2001;
PIMSS, 2001)
Table 1 above shows that South Africa’s six major cities with 31% of South Africa’s
total population, contribute, in total, 55% of South Africa’s GDP. Since 1990 the
share has increased slightly from 54% to 55%. The ranking of Johannesburg and
Cape Town as the two largest cities in economic terms, has remained unchanged
since 1990. Indeed, both these cities have enlarged their share of total GDP, in
particular Cape Town. In contrast, the share of all other cities declined since 1990,
most notably that of Durban (the largest single city) and the East Rand (Naude and
Krugell, page 6).

Cities and their hinterlands; urban/ rural linkages

Distorted spatial economy within our cities. Widening separation between
jobs, housing and people within the cities over the past decade, exacerbated by
the lack of efficient, affordable and safe public transport systems, growth of
polycentric business nodes and decline of CBDs, and location of low-income
housing and informal settlements.
Economic growth (productive cities) and poverty reduction
(inclusive cities)


Market-lead approach of business development vs. market-critical approach of
community development. Either/ or, or both? How do we tie the two together
conceptually and in practice?
Contradictory impact of successful global integration (intensification of the
underlying dualistic socio-economic structure). Decade-long trend of jobless
growth and widening inequality in the cities. Many people now unemployable,
and not just unemployed. Need to focus more on skills and human resource
development. Historically, relative underperformance in all our cities in these
areas:
All Cities Standard of Living Index CDI
CDI = 56.30
100.00
80.00
60.00
Product =
56.30
Infrastructure = 61.92
40.00
20.00
0.00
Education =
Waste = 75.89
56.00
Health =
35.13
Source: SA cities Network Urban Poverty Research Project (2002)
Redefining local economic development and the role of
municipalities






Need to understand the implications of global economic integration and the
changing role of cities. The success of communities will depend on their
ability to adapt to the changing and increasingly competitive environment.
Few businesses look to locate or expand in a community based only on the
advantages of a particular town or city. They look wider to what the region has
to offer. Whilst communities in a region will compete to attract investment,
there are also many opportunities for collaboration between communities and
regional institutions.
What are competitive cities? How to avoid `race to the bottom’ competition
and encourage cooperation based on recognition of comparative advantages,
e.g. Gauteng global city-region; port cities; auto sector?
Need to focus on roles and responsibilities of all three spheres of government
(including state-owned corporations), not just LED strategies.
How do we `localise’ of national government’s economic policies, and create
an inter-governmental alignment of policies, strategies, budgets and
programmes?
Which public sector interventions are the most effective?



Roles and responsibilities of the private sector: employment (80%),
investment, and redistribution? (Structuring the partnership between
municipality and city business)
Roles and responsibilities of the community sector
What interventions should the municipality be concentrating on in the context
of national and provincial government policies? (See Appendix One – Three
Waves of LED)
Municipal strategies and policies


Organisation of economic growth and poverty reduction interventions within
the municipality. Add-on or mainstream? Economic growth and poverty
reduction as the central organising themes of IDP, budget and business plans.
Implementation strategies: projects, or mobilisation of all sectors and line
functions?
Monitoring and assessment of impact of policies, strategies, programmes and
projects (government as a whole, municipality in particular). Role of the SA
City Development Index.
Appendix One
Three Waves of Local Economic Development
Wave
Focus
Tools
First:
During the first wave the focus was
on the attraction of:
To achieve this cities used:
1960s to
early 1980s


Second:
1980s to mid
1990s
Third :
Late 1990s
onwards
mobile manufacturing
investment, attracting
outside investment,
especially the attraction of
foreign direct investment
hard infrastructure
investments
During the second wave the focus
moved towards:

the retention and growing
of existing local businesses

still with an emphasis on
inward investment
attraction, but usually this
was becoming more
targeted to specific sectors
or from certain geographic
areas
The focus then shifted from individual
direct firm financial transfers to
making the entire business
environment more conducive to
business.
During this third (and current) wave
of LED, more focus is placed on:

soft infrastructure
investments


public/private partnerships

highly targeted inward
investment attraction to add
to the competitive
advantages of local areas
Source: World Bank
networking and the
leveraging of private sector
investments for the public
good


massive grants


tax breaks

expensive "low road"
industrial recruitment
techniques
subsidized loans usually
aimed at inward investing
manufacturers
subsidized hard infrastructure
investment
To achieve this cities provided:

direct payments to individual
businesses

business
incubators/workspace

advice and training for smalland medium-sized firms



technical support
business start-up support
some hard and soft
infrastructure investment
To achieve this cities are:

developing a holistic strategy
aimed at growing local firms

providing a competitive local
investment climate

supporting and encouraging
networking and collaboration

encouraging the development
of business clusters

encouraging workforce
development and education

closely targeting inward
investment to support cluster
growth

supporting quality of life
improvements